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Inequality and Redistribution in the Netherlands

Author

Listed:
  • Arjan Bruil (CBS)
  • Céline van Essen

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Wouter Leenders

    (UC Berkeley)

  • Arjan Lejour

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Jan Möhlmann

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Simon Rabaté

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

How high is income inequality in the Netherlands? How progressive are taxes and how much income does government spending redistribute? This study presents the most exhaustive responses for the Netherlands to these questions to date. We combine detailed administrative records on the universe of the Dutch population with national accounts aggregates to provide a thorough description of income inequality before and after taxation and government spending. Overall, taxes and government spending reduce the top 10%'s income share from 31% to 26%. We decompose this difference between pre- and post- tax income and show two main results. First, the tax system is regressive due to high consumption taxes, flat social contributions and a low tax on capital income. Second, the entire reduction in inequality comes from government spending that is targeted at the bottom of the distribution. We finally provide a wide set of alternative scenarios to investigate the sensitivity of our results to different distributional assumptions. Our main conclusions are robust to this sensitivity analysis.

Suggested Citation

  • Arjan Bruil (CBS) & Céline van Essen & Wouter Leenders & Arjan Lejour & Jan Möhlmann & Simon Rabaté, 2022. "Inequality and Redistribution in the Netherlands," CPB Discussion Paper 436, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:436
    DOI: 10.34932/crvm-bq32
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    2. Matteo Dalle Luche & Demetrio Guzzardi & Elisa Palagi & Andrea Roventini & Alessandro Santoro, 2024. "Tackling the regressivity of the Italian tax system: An optimal taxation framework with heterogeneous returns to capital," LEM Papers Series 2024/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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